Key Performance Indicators Unit 3 OC1

Performing????? evaluate performance by determining whether the objectives have been achieved.  How is the organisation performing? Is the organisation performing as planned? Has its performance improved over time? How does its performance compare to that of similar organisations? organisation needs to ask whether the desired results were achieved and, if not, where and why they failed. If yes, what worked well Depends on the type of organisation and its objectives as to how it will measure performance

Effective and efficient An LSC evaluates its performance by assessing whether it has been effective as well as efficient. Effectiveness indicates to what degree an organisation has accomplished the objectives it set out to achieve. In other words, the organisation is ‘doing the right things’. Efficiency refers to how well an organisation uses the resources needed to achieve a goal. The most efficient use of resources occurs when benefits are greater than the costs of resources employed.

KPI’s KPIs draw on information taken from a variety of sources, such as accounting reports, statistics, data gathered from customer or employee feedback, or from observation

Profitability Profitability measures the earning performance of the organisation and indicates its capacity to use its resources to maximise profits. Profitability depends on the revenue earned in relation to costs and other expenses incurred in earning revenue. A common method of measuring profitability is to calculate the net profit ratio. Net profit is the difference between revenue earned from the operations of the business less any expenses incurred in earning that revenue. Net profit is often referred to as ‘the bottom line’.

Percentage of market share is the percentage of a market that a business has, compared to its competitors. It is calculated by dividing an organisation's sales (from that market) by the total sales of all organisations in that market and expressing this as a percentage.

Rate of productivity growth Productivity compares the amount of output produced to the amount of inputs (resources) going into production. An indicator of productivity is the rate of productivity growth. This is the change in productivity in one year compared to that of the previous year. Growth in the rate of productivity indicates that the organisation is using resources more efficiently. Productivity will improve if an organisation uses fewer inputs to obtain the same level of output, or if more output is produced from the same input.

Customer and staff satisfaction Customer satisfaction (the degree to which an organisation's performance meets a customer's expectations) should be the main aim of all the activities that the organisation undertakes. A highly satisfied customer will remain loyal to the organisation, make repeat purchases and generate word-of- mouth business. At the heart of customer satisfaction is the level of service provided, and good customer service requires adequately trained staff. Members of staff who have positive attitudes towards their job will be motivated to work more productively. Staff satisfaction can be improved by the provision of training and a flexible workplace, management style, corporate culture or by empowering staff to become involved in making decisions. Data generally gathered through surveys but note – a survey is NOT a KPI

Other KPI’s Staff turnover Customer complaints Level of wastage - An organisation manages resources more efficiently by reducing waste, which can cut production costs. Number of workplace accidents - An unsafe workplace impacts on the productivity of the organisation for several reasons. Staff members who feel unsafe may not be motivated to perform harder, and accidents can actually stop production. Benchmarking - This occurs when an organisation evaluates its own performance by comparing it to that of other leading organisations known for their excellence. Benchmarking allows for a comparison to be made for a more accurate evaluation.